Cost Savings - What Can Executives Do?

In recent days there have been many articles about driving cost down and what we can do about it.


While much has been said and written, how much has been done in your organisation? What is hampering your organisation from implementing or achieving cost savings initiatives.?


Cost savings initiatives can be done holistically and on company wide basis or just done on a selective project on a one off basis.While the former is on a much larger scale and takes a longer time, its long term effects on the organisation is also much greater and sustainable. On the other hand, short projects can produce faster cost savings impact.


Executives will have to weight the company overall procurement and sourcing strategies, competition, supplier's bargaining power as well as the intended bottom line targets in order to select the right mix.


After decision has been made, it is time to look into the resource i.e. is this project going to fully driven by internal staffs or getting external consultants to assist or a mix of the two.


Getting external help yields many benefits.


Consultants bring with them a variety of industry experience and will be more focused on the achieving the strategic goals as they are not involved in daily operational issues. Local staff also get educated in the process and what is more effective as training with actual hands-on feel?.


Since most companies do not have the staff resources to be able to regularly review expenses and reduce costs or do not have the time to monitor the market place or their suppliers. They may engage consultants to expertly manage the situation.


Moreover, consultants can provide higher management a 'bird's eye' & independant view of the current state of the procurement process and where significant improvements can be made.


The first thing is to consider if the consultant may do for the company. For example, do they have the track record and adequate resources to deal with your company/project size? Then how are the fees structured and the scope of work they provide.


Internally, prerequisites to successful cost reduction are high commitment & support from higher management, good execution skills and right mindset of the mid & lower level staffs. All but not least, self interest should be seconded to company goals. It should not be seen as just another 'talk of the month' thing.


On a more macro level, effective cost reduction can be derived from 2 major areas namely direct and indirect cost. Often and not the most neglected area is the indirect costs that seems 'trivial' to many companies but is where cost reduction can be achieved easily.


Here are 10 simple tips where you can start to do a cost saving initiatives.

1. Centralized purchasing.


2. Cutting paperwork.


3. Consider using supplier's house brand.


4. Better negotiation skills in purchasers.


5. Review existing specifications or design.


6. Adopt Lean concept to every aspects of the organisation.


7. Rationalize your logistic routes.


8. Review holding stock levels.


9. Benchmarking against best practise.


10. Improve workflow process to cut inefficiencies

Concluding, SMEs should be adopting procurement best practices to reduce business costs and improve productity.

Passion - The Oil of life?

What is passion? what is so important about it that people are finding answers to it.
There have been many write ups about Passion and how to find them.

There are the questions type, the meditation version and then there is the solitude advice.

Again what is the more effective ways that people have encountered and I am looking forward to real and true stories.

Cost down: Can E-bidding help?

Today in the ever rising cost of commodities, such as oil (USD141/barrel), flour and even rice, companies are experiencing sharp increase in cost of production.


Daily essentials like electricity has also shown sharp increase in countries where a great amount of electricity are generated from diesel. Transportation costs has also risen and is causing a huge stress on businesses and the consumers at large.


At the same time, consumers are witholding spending as an immediate reaction to rising cost. This causes companies to experience decline in sale and yet an increase in production costs.


Studies have shown that it is much easier to cut cost by 1% then to increase sales by 10% and yet obtaining the same bottom line.


It would be a natural flow for business owners or procurement managers to ask "how can I stay competitive" or "how can I cost down at a time when cost are rising?".

E-bidding

E bidding or E reverse auction as some calls it is one of the strategic tools in procurement best practices. If I could summarize it in one sentence I would call it "an effective tool for price negotiation."

Many large organisations have used it typically in the U.S. and also Europe. It is relatively new in Asia and its receptiveness is still much at an infancy stage.

Bid comes in many forms and each has its own strength. Like in an auction we have the English auction, the Dutch auction and many versions more, bidding is very much in the same fashion. the more common ones are the time limit and the rounds.

In the time limit, the bid will run for a specified time frame and the bid is dynamic where as in he rounds, the bidders will log in one price in each round and the the will go for a specified number of rounds. However, which ever method is used, the end results is the same and that is the lowest priced bidder wins.

Benefits

It simplifies your negotiation.

Effectively cost down tool.

It also improve transparency and fair play in the procurement system.

Improves the chance of new market for suppliers.

Implementation

It is often wise to have a independant consultant to help companies who wish to deploy E bidding tools lay out the process.

While it's benefit is compelling for companies to use E bid, there are couple of activities that is required and important in order to have a process that has strong integrity and professionally executed. This will ensure a fair and transparent process to ensure the integrity of the exercise so that vendors will always be satisfied and without doubts. Then this exercise is only being felt as satisfactory.

There are a good numbers of professional service available in the market and careful selection of the right party to conduct the E bidding is vital for the success of the bidding event. Some typical areas to look at is the level of security in the server and software features. Apart for this is the number of successful E bid conducted by the consultant should also be considered. Most importantly is still the level of service that the consulting company may provide you along the way and the processes used to achieve this end.

In short, E bidding is a process and one of the tools in successful Supply Chain or Procurement function. The question is always its role in the overall strategy of the company and not to be treated merely as the end point to a cost down exercise.

Happy Bidding!